Growth remains elusive for Nigeria as key sectors record 3Q crash

MON, NOVEMBER 21 2016-The debate about whether Nigeria’s economy faces a hard time or will be better 2017 is glaringly now more than semantic to investors and economy watchers, who have seen gross domestic product (GDP) contrast three quarters in a row in 2016. Pronouncements from the federal government are increasing now been drowned by these signs which are worrying.

The latest numbers from the National Bureau of Statistics (NBS) makes it even screamingly obvious. In nearly all sectors it is a story of deafening contraction, reflected in overall drop of -2.24 % (YonY) in real term in the third quarter of 2016. The decline, according to NBS is lower by 0.18% points from growth recorded in the preceding quarter and also lower by 5.08% points from growth recorded in the corresponding quarter of 2015. Quarter on quarter (unadjusted for seasonality), real GDP increased by 8.99% During the quarter, aggregate GDP stood at N26,558,952.83 million (in nominal terms) at basic prices. Nominal GDP however grew by 9.23%. This growth was higher relative to growth recorded in the third quarter of 2015 by 3.22% points.

Moody’s prophesy suggests that Nigeria’s only hope is to ensure oil production reaches the elusive 2.2 million barrels per day production level.

The NBS said oil production fell to 1.63 million barrels per day, down from 1.69 million in the second quarter. However, the non-oil sector grew by 0.03 percent in the third quarter, compared with negative growth in the first two, NBS said.

So far, Oil’s contribution to revenue dropped to 46% in 2Q16 vs this decade’s peak of 78% according to RenCAP analyst, Yvonne Mhango. This in turn has hurt deeply federally collected revenue which fell in second quarter 2016 and for the eight consecutive quarter, by 18% (YonY) to N1.1 trillion.

The NBS report comes a day before an interest rate decision, where analysts expect the central bank to hold benchmark rates at 14 percent, amid galloping inflation that hit a more than 11-year high of 18.3 percent in October.

Prices have been pushed up by the dollar scarcity in a country dependent on imports, which has been exacerbated by currency restrictions imposed by the central bank last year in an effort to defend the naira. Oil sales are the OPEC member’s main source of dollars to fund imports.

“The ramp up in fiscal spending has been slower-than-anticipated, and the policy response in general remains weak,” said Cobus de Hart, economist at NKC Economists.

In October, the NBS said the economy is likely to shrink 1.3 percent in 2016, a sharp downward revision of its estimates at the beginning of the year, prompted by dramatic falls in the currency. The International Monetary Fund (IMF) has predicted that Nigeria’s economy will contract by 1.8 percent this year.